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Southwest Airlines revamps its rewards program

January 6, 2011 | 2:31
am

In a bid to attract more business travelers, Southwest Airlines has rolled out a revamped frequent-flyer program.

The Texas-based airline, known for its low-cost domestic flights, unveiled a new Rapid Rewards program Thursday. The program, set to launch March 1, will replace the long-standing system whereby frequent-flyer credits were based on the number of trips taken with a new one in which points accrue based on the price of fares.

The new plan also adds perks for elite rewards program members, including free onboard Wi-Fi.

Unlike under the old program, points will not expire and they will be usable for any seat, with no blackout dates. Customers will also have the new option to use their Southwest points toward international flights.

The move comes shortly after Southwest announced plans in September to acquire AirTran Airways for $1.4 billion.

Airline industry experts said the changes in the reward structure were most likely to benefit business travelers, who tend to pay higher fares because they often book at the last minute.

“I think all airlines really would prefer having business travelers and letting the leisure customers go by bus,” said George Hobica, founder of the site Airfarewatchdog. "They want to incentivize people to buy higher fares.”

Jay Sorensen, president of consulting firm IdeaWorks, which analyzes the airline industry, agreed that the proposal appeared to be primarily a bid to attract business travelers who may not have considered Southwest as an option in the past.

But, he said, other customers will also benefit from the changes, particularly from the elimination of expiration dates.

The changes have been in the works for several years. Southwest Chief Executive Gary Kelly projected that the revamp would eventually amount to hundreds of millions of dollars in additional revenue annually, between new customers and increased spending by existing users.

Customers will accrue 6 to 12 points per dollar spent, depending on the type of ticket they choose, with the pricier Business Select tickets accruing the maximum amount. (Southwest, which does not have assigned seats on its flights, has no business class on its flights but offers benefits including priority boarding and in-flight drinks to Business Select customers.) The points will be redeemable at a rate of 60 to 120 per dollar.